<\/p>\n
Bank of America is doubling down on Micron Technology (MU) days before the memory-chip giant faces a major test of 2026.<\/p>\n
For the better part of the year, Micron stock has been on fire, surging 276% this year through Sept. 23, according to Yahoo Finance data, and transforming a cyclical chipmaker into one of the market’s hottest AI plays. <\/p>\n
Momentum has cooled off, with shares gaining about 2% over three months after retreating from their June record.<\/p>\n
That pause has sharpened the debate. <\/p>\n
Investors are firmly in “show-me” mode with AI and asking whether Micron can preserve the market’s extraordinary pricing, margins, and earnings as new memory capacity enters the market.<\/p>\n
Its recent quarterly showing raised the stakes. <\/p>\n
Q3 revenue more than quadrupled to a record $41.46 billion, adjusted earnings crushed expectations, and gross margin reached 84.9%. Micron guided toward $50 billion in fiscal Q4 sales.<\/p>\n
But Bank of America believes investors are watching the wrong issue ahead of Micron’s Sept. 30 report. Its focus points to what could keep this rally alive.<\/p>\n
Bank of America sees 45% more upside in Micron stock<\/p>\n
Bank of America analyst Vivek Arya reiterated a Buy rating and $1,550 price target on Micron.<\/p>\n
That represents 45% upside from the stock’s Sept. 23 close of $1,071.88, above the 41.4% upside from the report’s reference price.<\/p>\n
More AI:<\/p>\n
Nvidia just made a move Wall Street wasn’t ready for<\/p>\n
Microsoft just took sides in AI policy fight<\/p>\n
OpenAI just disclosed something genuinely alarming<\/p>\n
The thesis is less about another dramatic pricing surprise and more about whether Micron can keep its fiscal 2027 gross margin near its current mid-80% level. <\/p>\n
BofA believes that durability can effectively support earnings of $150 to $200 per share, more than double year over year, while leaving the stock valued at only about seven times forward earnings.<\/p>\n
That is well below the roughly 10-times multiple Micron has historically sustained.<\/p>\n
Near-term industry checks strengthen the case. BofA says most DRAM average selling prices increased 20% to 30% sequentially during Q3, while NAND pricing rose more than 15%. It also assumes at least a single-digit increase during the fourth quarter.<\/p>\n
More importantly, hyperscalers are reportedly agreeing to pay higher DRAM prices in the first half of 2027 than during late 2026.<\/p>\n
That gives Micron unusual earnings visibility. <\/p>\n
BofA’s argument is that investors should focus on margin durability and AI demand, without becoming distracted by the mechanics of its new customer contracts.<\/p>\n
Bank of America backs Micron stock as investors await crucial quarterly results.<\/p>\n
Bloomberg \/ Getty Images<\/p>\n
Buybacks could become Micron’s next powerful catalyst <\/p>\n
Margins are one part of Bank of America’s bullish setup. <\/p>\n
The firm believes Micron could restart share buybacks after Dec. 9, when restrictions tied to its CHIPS Act grants expire.<\/p>\n
BofA estimates Micron’s trailing free cash flow could finance the retirement of 8% to 10% of outstanding shares. A program that large would lift per-share earnings while signaling that management considers the current memory upcycle durable enough to return capital.<\/p>\n
Nevertheless, the elevated CapEx creates tension. <\/p>\n
BofA expects fiscal 2027 capital spending between $45 billion and $48 billion, an increase of more than 60%. However, management has indicated that over half the growth should fund longer-cycle cleanroom construction rather than immediate capacity additions, which lays to rest the fears that new supply could quickly crush prices.<\/p>\n
BofA pushes back against concerns that Nvidia products may require less high-bandwidth memory. Some chips could use lower specifications, but tightness may persist as demand shifts between 12-high and 8-high stacks.<\/p>\n
TrendForce forecasts cited in the note point to HBM pricing rising more than 120% next year to above $3.80 per gigabyte, supported by HBM4 and HBM4E adoption.<\/p>\n
Even if Nvidia reduces memory content, AMD could differentiate its accelerators by maintaining higher HBM specifications.<\/p>\n
Micron’s discount comes with real cycle risk<\/p>\n
Micron looks inexpensive at seven times BofA’s projected fiscal 2027 earnings, compared with its sustained multiple of about 10 times. <\/p>\n
That discount, though, reflects a concern, which is that earnings estimates can collapse when the memory cycle turns.<\/p>\n
BofA itself models memory pricing falling more than 10% in calendar 2028. New capacity arriving during the second half of 2027 could pressure prices, margins, and the earnings supporting Micron’s valuation.<\/p>\n
The bank’s $1,550 target assumes generous outcomes. Its sum-of-the-parts model values Micron’s memory business at $1,040 per share using three times 2028 book value, near the top of its historical range. <\/p>\n
The AI HBM operation receives a 31-times earnings multiple, in line with AI-compute peers. Investors should therefore treat Micron as an execution-sensitive AI holding, not a conventional bargain.<\/p>\n
The key markers are clear.<\/p>\n
Fiscal 2027 gross margin must remain near the mid-80s, AI capital spending must stay resilient, and new capacity must not overwhelm demand. A buyback would strengthen the case.<\/p>\n
Still, weaker data-center spending, steeper pricing declines, Chinese competition, or market-share losses could turn a low earnings multiple into a value trap.<\/p>\n
Related: 5-star analyst sets jaw-dropping price target on SanDisk stock<\/p>\n
#Bank #America #doubles #Micron #stock #earnings<\/p>\n","protected":false},"excerpt":{"rendered":"
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